ORDER
M. Katju and R.S. Tripathi, JJ.
1. This writ petition has been filed for issuance of a writ of mandamus declaring the demand of increased premium in respect of Group Savings Linked Insurance Scheme as contained in letter dated 15.12.1997 and 27.1.1998 by the Life Insurance Corporation as arbitrary and illegal. It has also been prayed that the Life Insurance Corporation be directed to renew the Group Insurance Policy on same terms and conditions as mentioned in the policy Rules dated 19.9.1995 without demanding any increased premium.
2. The petitioner is a statutory body constituted under Section 18 of the U. P. Water Supply and Sewerage Act, 1975. By the G.O. dated 18.9.1988 the conditions of the service of the employees of the petitioner are the same which are applicable to employees of the Nagar Maha Palikas.
3. It is stated in paragraph 5 of the writ petition that the Group Insurance Scheme was introduced by the Life Insurance Corporation on the basis of the mutual agreement with the Life Insurance Corporation of India and the State of U. P. and consequently the State Government has issued a G.O. dated 24.5.1976. A true copy of the G.O. implementing the Group Insurance Scheme in the Local Bodies is Annexure-1 to the writ petition. The State Government has further introduced the Group Insurance Scheme in Local Bodies vide Annexure-2 to the writ petition.
4. Under the Scheme the employees have to contribute Rs. 25 per month and are entitled for the benefit as enumerated in Clause 8 of the Group Savings Linked Insurance Scheme which has been quoted in para 8 of the writ petition. By G.O. dated 19.2.1980 and 17.3.1980 State Government has revised the contribution of the employees. The last policy issued is dated 19.9.1995 wherein it is provided that the renewal shall be effected each subsequent year since 19.9.1995. Copy of the Rules of the Group Savings Linked Insurance Scheme is Annexure-3 to the writ petition. Under the Scheme the employees of the Jal Sansthan have to pay the contribution as stated in paras 13 and 14 of the writ petition.
5. It is alleged in para 15 of the writ petition that to the utter surprise of the petitioner the Life Insurance Corporation issued a letter dated 15.12.1997 whereby premium of Category-D employees was raised from Rs. 35 to Rs. 135 per month and premium of Category-B was raised from Rs. 120 to 360 per month vide Annexure-4. Aggrieved, this petition has been filed. A counter-affidavit has been filed by the Life Insurance Corporation and we have perused the same.
6. In our opinion, this writ petition deserves to be allowed. When a person takes an L.I.C. policy it amounts to a contract between that person and the Life Insurance Corporation. A contract is a bilateral or multilateral agreement which creates certain legal obligations when it is signed by the parties. A contract can only be altered, modified or changed by mutual agreement of the parties vide Section 62 of the Contract Act vide City Bank N. A. v. Standard Chartered Bank, AIR 2003 SC 4630 (vide para 48). A contract when entered into by the parties cannot be unilaterally changed or cancelled by one of the parties. There has to be mutual consent of the parties for altering it. Since the rate of premium is fixed in the L.I.C. policy the same can only be changed by the mutual consent of the parties and not unilaterally by the Life Insurance Corporation. A contact signed by the parties cannot be unilaterally changed by one of the parties. In the present case the Life Insurance Corporation entered into a contract with the petitioner by executing the L.I.C. policy. This policy contains the terms regarding the rate of the premium. Hence the rate as mentioned in the policy cannot be unilaterally changed by Life Insurance Corporation without consent of the person who has taken out the policy.
7. Clause 9 of the master policy, a copy of which is Annexure-C.A.-1 states :
“The corporation reserves the right to revise from time to time the rate of interest applicable to the Running Account, the premium rates and any other provisions of this policy upon giving to the Grantees three months previous notice in writing. Such variations shall apply to all Assurances with effect from the Annual Renewal Date coincident with or next following the date of expiry of the notice.”
8. The above clause no doubt permits the Corporation to revise the premium but only after giving to the Grantees three months previous notice in writing. Sri S. K. Mehrotra has admitted that no such three months previous notice was given to the petitioner. Hence revisal of the premium rate was wholly illegal. Obviously the purpose of giving three months previous notice is that if the premium is sought to be revised by the Life Insurance Corporation unilaterally at a rate which is not acceptable to the grantee then the grantee may choose to cancel the policy and withdraw his money with the Life Insurance Corporation. Unless such three months previous notice in writing is given the Life Insurance Corporation cannot unilaterally revise the premium rate. Since no such notice was given, the revision of the premium rate was wholly illegal. The writ petition is, therefore, allowed. The increase of premium in Group Savings Linked Insurance Scheme as contained in letters dated 15.12.1997 and 27.1.1998 is quashed. The Life Insurance Corporation is directed to renew the policy but if it wishes to increase the rate of premium it must give three months previous notice as provided in Clause 9 of the master policy. The petition is allowed.